http://www.chetansharma.com/mobileappseconomy.htm

Industry Study Commissioned by Getjar

Executive Summary

Mobile applications (apps) have been around since the late nineties and the apps stores have been available for a quite some time as well. Operators have been offering content and applications on their appstores for most of the last decade. But it wasn’t until the launch of Apple Appstore that the appsworld started to blossom in earnest. First, it fundamentally changed the revenue model in favor of the developers which has become the current defacto standard (70/30) in the mobile apps business. Second, it brought more developers into the ecosystem as it fostered the notion of focusing on just 1-2 platforms rather than the entire device ecosystem to be relevant. Third, the time-to-market equation changed for developers so that they can get the application from conception to market in a fraction of a time of what was possible in the past. Finally, the importance of a seamless end-to-end user experience to increase usage and monetization became a core principle in the mobile apps space.

While Apple has played a significant role in reenergizing the mobile apps space by bringing more consumers and developers into the ecosystem, there is significant activity outside the iPhone or smartphones space that is often not discussed. The purpose of this research study is to take a holistic look at the mobile apps space across all platforms and on a global basis to get a sense of the size of the mobile apps market and the direction it is headed.

The overall mobile apps downloads are expected to increase from over 7 billion in 2009 to almost 50 billion by 2012 growing at the rate of 92% CAGR. The revenue from mobile apps which includes both paid downloads and revenue from advertising and virtual goods is expected to increase from $4.1 billion in 2009 to $17.5 billion by 2012 at the rate of 62% CAGR. Though ondeck (operator managed) mobile apps sales exceeded those from offdeck in 2009, by 2012, offdeck is expected to hold the lion share of the mobile apps revenue.

The dynamics of the app market are quite different in emerging nations where to effectively monetize the significant app momentum (app downloads/active user and growth rates in some of these countries exceed those from the western markets, irrespective of the device type), creative strategies are needed to attract new consumers and different business models will be required to make the regional ecosystems viable.

Overall, by enhancing discovery, improving user experience, dropping price barriers, and increasing developer revenue share, the apps ecosystem can continue to prosper. The paper presents the results of the study in more detail as well discusses the future of mobile apps and how the app economy is likely to evolve.

Download full paper

My thanks to Getjar for supporting the research.

Thanks

Chetan Sharma

Disclaimer: Some of the companies mentioned in this note are our clients.

I haven’t had a chance to review it cover-to-cover but will do so sometime this week. Off the bat, designating broadband as a key infrastructure element is commendable. We have argued that in our Wireless Broadband book. Put putting the focus and energy of the political leaders to think connectivity as a necessity is a critical first step. The bulk of the heavy lifting will be done by the private sector but if the regulators can create an environment of increased competition, reduced red tape, and mandate transparency and accountability, we will be in good shape.

It is also good to see that the Commission has tied the broadband plan to several vertical industries – Health, Education, Energy, Public Safety, Governance, and Economic Opportunity in general.

Our paper “State of The (Mobile) Broadband Union” made a couple of appearances in the broadband plan

page 22

Evaluating network availability and performance is much
harder for mobile than for fixed broadband. For instance, the quality
of the signal depends on how far the user is from the cell tower,
and how many users are using the network at the same time.
Therefore, the fact that users are in the coverage area of a 3G network
does not mean they will get broadband-quality performance.
Still, as with fixed broadband, it is clear that the speeds experienced
on mobile broadband networks are generally less than
advertised. Actual average download speeds have been reported
to be as low as 245 kbps, while speeds in excess of 600 kbps are
advertised. Actual average upload speeds as low as 106 kbps have
been reported, versus advertised rates of 220 kbps or higher.

page 39

Mobile data users typically receive download speeds ranging
from hundreds of kilobits per second to about one megabit per
second

Thanks to our colleagues at Root Wireless for assisting with this study.

I will be analyzing the plan and write pieces as i get through the tome.

The Plan’s call for action over the next decade includes the following goals and
recommendations:

• Connect 100 million households to affordable 100-megabits-per-second service, building the world’s largest market of high-speed broadband users and ensuring that new jobs and businesses are created in America.
• Affordable access in every American community to ultra-high-speed broadband of at least 1 gigabit per second at anchor institutions such as schools, hospitals, and military installations so that America is hosting the experiments that produce tomorrow’s ideas and industries.
• Ensure that the United States is leading the world in mobile innovation by making 500 megahertz of spectrum newly available for licensed and unlicensed use.
• Move our adoption rates from roughly 65 percent to more than 90 percent and make sure that every child in America is digitally literate by the time he or she leaves high school.
• Bring affordable broadband to rural communities, schools, libraries, and vulnerable populations by transitioning existing Universal Service Fund support from yesterday’s analog technologies to tomorrow’s digital infrastructure.
• Promote competition across the broadband ecosystem by ensuring greater transparency, removing barriers to entry, and conducting market-based analysis with quality data on price, speed, and availability.
• Enhance the safety of the American people by providing every first responder with access
  to a nationwide, wireless, interoperable public safety network.

I think the commission gets very high marks for engagement. Perhaps the most open and interactive proceedings and exercise in its history. I personally attended over web and in person various proceedings and I think Commission went over above and beyond to be inclusive and transparent. Chairman made himself available at various industry forums for direct Q&A.

Information for the plan was gathered in 36 public workshops, 9 field hearing, and 31public notices that produced 75,000 pages of public comments. The debate went online with 131 blogposts that triggered 1,489 comments; 181 ideas on IdeaScale garnering 6,100 votes; 69,500 views on YouTube; and 335,000 Twitter followers. The task force augmented this voluminous record with independent research and data-gathering.

I also like the fact they have set a 2020 vision and 100 Squared initiative so everybody knows what we are shooting for. As always, the devil is in the details esp. regarding the route to go there. Much has been made of the “spectrum crisis” and the additional 500 MHz spectrum that can be made available. Regular readers know that I am not a big fan of throwing more spectrum at the congestion problem. Of course, more spectrum is better and since it takes time to get it, it is better to start now. However, by doing that we are training the industry to keep coming back for more spectrum whenever there is congestion again, clearly a short-term approach. I would have liked a more holistic approach (and this still might be case .. don’t know since haven’t seen the details) of additional technologies and solutions (in which additional spectrum is just one more tool and not the primary tool).

Last week, I had the opportunity to host and talk to the former FCC Chairman Kevin Martin in detail about the proposed plans and he also agreed that by having a deeper roll out of fiber so that the mobile data traffic can be offloaded asap is a plan worth considering more seriously at the national level. That would mean a different kind of network architecture and requirements. Summary of the event here.

One of the challenges we are going to face is the opposition in securing additional spectrum from the broadcasters and public safety as well as on the price tag. Once the politics enters the mix, it will get even more complicated. My hope is that the leaders will have the wisdom to think long term so that we can get on with the plan and not get held up in red tape and bureaucracy and make real progress in the short-term otherwise we will still be debating the same issues in 2020.

22nd. CTIA, Vegas

My friend Ajit is chairing “Mobile Web & Apps” world forum at CTIA. It is a packed house. I will be moderating the mobile advertising panel at 1:00pm

1:00-1:50 SuperSession Discussion: Media and Advertising

Chetan Sharma Consulting, President – Chetan Sharma Consulting

Joe Lalley, Senior Director of Product Development for Global Digital Media - MTV Networks

Gary Schwartz, President and CEO - Impact Mobile

Jerry Rocha, Vice President of mobile Media- The Neilsen Company

Peggy Salz, Founder - mSearchgroove.com

Vijay Chattha, President - VSC/AppLaunchPR

24th. CTIA. Vegas

My friend Jai Jaisimha is hosting a developer pitch summit at CTIA and I will be moderating the Raising Money panel at 4pm

Presenters will pitch their product to a panel of the best minds in mobile venture capital.

Panelists:
Tim Chang, Principal, Norwest Venture Partners
Tom Huseby, Managing Partner, Seapoint Ventures
Len Jordan, Venture Partner, Madrona Venture Group
Nagraj Kashyap, Vice President, Qualcomm Ventures
Mitch Lasky, General Partner, Benchmark Capital
Scott Raney, Partner, Redpoint Ventures
Moderator: Chetan Sharma, Chetan Sharma Consulting

First up was Kevin Martin, former FCC Chairman and current co-chair of the communications practice and partner at the leading law firm of Patton Boggs in Washington DC.

Second speaker was Rob Glaser, Chairman and Founder, Real Networks. This was his first public appearance since he stepped down as CEO of Real Networks.

Kevin talked about the National Broadband Plan that is going to be released this coming tuesday and Rob opined on the opportunities in mobile. I had the good fortune of asking and moderating the Q&A after the initial presentation.

Summary of his comments:

• In response to my question if we are becoming too dependent on the spectrum as a way to alleviate data congestion issues, he said that spectrum should be viewed as a renewable resource, however, we should look for expanding fiber as close to end point as possible, look for alternate ways to offload traffic (something I agree with completely)
• Technology advancements are allowing for more efficient use of the spectrum
• Current carriers have about 450 Mhz, broadband plan seeks to double the spectrum by adding another 500 Mhz though it will be hard to get given the constraints
• Broadcasters can make some spectrum available for auction and share the proceeds
• We are still early in the Open Access process but full impact is yet to be felt
• Beyond the carriers and airwaves, the regulatory authority of the FCC is limited as we go deeper into the ecosystem
• Wireline infrastructure shouldn’t be looked as a separate entity. Since there will be a lot of wireless traffic that will go over wireline, it is part of the same infrastructure
• USF could be used to expand the broadband services to the masses

Rob’s talk (embedded below) was about the opportunities created by the introduction of smartphone/superphones over the next 34 years.

Opportunities are:

• •“Digital Persistence”
• •Universal Access across Devices
• •Making Discovery Easy
• •Empowering Social Expression and Engagement
• •Leveraging The Global Nature of These Trends

and of course challenges are:

• •Delivering solutions that scale with variable bandwidth and device capabilities
• •Creating commercial models across an extremely complex value chain
• •Vertical versus horizontal industry structure
• •Media industry adaption of new business models
• •Educating users on privacy and social implications

In summary,

• The Next Mobile Revolution is both a huge opportunity and a massively disruptive force
  • §It will ultimately be bigger than the PC or Web 1.0 or 2.0 revolutions
• Cross-industry collaboration, while complex, is essential
  • §“We must all hang together, or most assuredly we shall all hang separately”

After the intense 30 minute talk that the sold out crowd tried to absorb as much as possible, I asked him what Real would do if he were starting today. And there was a similar question from Andy Kleitsch from Billing Revolution about advise to startups. Here is some of what he had to say (courtesy: Techflash)

On the question of vertical vs. horizontal integration (question from Tricia Duryee of Moconews), he had this to say (courtsey: Techflash)

His presentation below:

We also announced the June 10th event that will all about Mobile Startups. Registration is open. It should be a great discussion with startup CEOs.

Also, announced the Sept 8th event which is of the long-form (day long) – Mobile Future Forward. Great speakers and useful discussion. Stay tuned for more details. We are working feverishly on the details.

Many thanks to our generous sponsors who believe in the vision behind the MFF event – Real Networks and Millennial Media. Your support is much appreciated.

Finally, a personal thanks to all those of you who helped out. You know who you are. We are a pretty lean operation and need assistance from our friends to make every event successful and useful to the mobile community.

Overall, we had as much fun hosting the event as we had in preparing for it. Please let us know your feedback.

Some pictures from the event:

Some additional coverage of the event by some of the most outstanding reporters in the industry - Seattle Times, Techflash, Moconews, GigaOM, and PC World. Thanks.

http://seattletimes.nwsource.com/html/technologybrierdudleysblog/2011306485_rob_glaser_surfaces_outlines_m.html

http://seattletimes.nwsource.com/html/technologybrierdudleysblog/2011306195_former_fcc_boss_on_fedsfree_wi.html

http://techflash.com/seattle/2010/03/rob_glaser_on_apple_android_and_the_future_of_mobile.html

http://techflash.com/seattle/2010/03/rob_glasers_advice_to_startups.html

http://moconews.net/article/419-former-realnetworks-ceo-rob-glaser-says-for-now-apple-has-won/

http://moconews.net/article/419-fcc-former-chairman-says-concerns-for-open-access-persist/

http://gigaom.com/2010/03/10/rob-glaser-defines-the-superphone-and-predicts-the-mobile-future/

http://gigaom.com/2010/03/10/former-fcc-chair-lays-out-the-limits-on-the-agencys-authority/

http://www.pcworld.com/businesscenter/article/191195/former_fcc_chair_says_more_fiber_will_help_wireless_crunch.html

http://www.pcworld.com/article/191200/rob_glaser_thinks_mobile_is_the_next

http://seattletimes.nwsource.com/html/technologybrierdudleysblog/2011306485_rob_glaser_surfaces_outlines_m.html

http://seattletimes.nwsource.com/html/technologybrierdudleysblog/2011306195_former_fcc_boss_on_fedsfree_wi.html

http://techflash.com/seattle/2010/03/rob_glaser_on_apple_android_and_the_future_of_mobile.html

http://techflash.com/seattle/2010/03/rob_glasers_advice_to_startups.html

http://moconews.net/article/419-former-realnetworks-ceo-rob-glaser-says-for-now-apple-has-won/

http://moconews.net/article/419-fcc-former-chairman-says-concerns-for-open-access-persist/

http://gigaom.com/2010/03/10/rob-glaser-defines-the-superphone-and-predicts-the-mobile-future/

http://gigaom.com/2010/03/10/former-fcc-chair-lays-out-the-limits-on-the-agencys-authority/

http://www.pcworld.com/businesscenter/article/191195/former_fcc_chair_says_more_fiber_will_help_wireless_crunch.html

http://www.pcworld.com/article/191200/rob_glaser_thinks_mobile_is_the_next_big_thing.html

March 5, 2010, 1:06 PM

Do All Small Businesses Need a Mobile Strategy?

By LORA KOLODNY

http://boss.blogs.nytimes.com/2010/03/05/expert-mobile-advice-for-small-businesses/

Jon MartGoin’ Mobile: Richard Wong at the Mobile Premier Awards

At the Mobile Premier Awards — an international competition for mobile start-ups held last month at the Mobile World Congress — the message was clear: Web sites are old school, and mobile is a growing requirement for every industry and business.

Investors and entrepreneurs who judged and won at the M.P.A. competition were eager to offer tips and predictions to help all business owners — not just those with technology companies — prepare a mobile strategy. Here are some of their suggestions:

First, every company should try to become “visible” to mobile devices. “The idea is that if a consumer is looking for you on the run,” said Chetan Sharma, a mobile consultant who judged at the M.P.A. competition, “your info must be available in any format where they are looking to consume that information — or else you miss an opportunity.”

While smartphones can access most Web sites, the content in most sites isn’t coded to be read or found by people using devices on the go, with small screens and mobile browsers, search engines and operating systems. Smartphones, for example, can’t read Flash content, which many dance clubs and restaurants favor to create aesthetically pleasing sites.

Mr. Sharma recommends checking business directories, map and review sites and apps already popular with mobile users to see if your company is listed. If not, you can list basic details like your location, contact information and a short description free on many sites and apps. You should check Google Maps, Yahoo Local, Nokia’s Ovi Prime Place, Microsoft’s Bing Local Listings,Yelp and Foursquare.

You might also optimize your company’s existing Web content, suggestedDavid Harper, chief executive of Percent Mobile, a New York-based mobile analytics company that won a Gold Award for Early Stage Innovation. If you maintain a blog on WordPress, for example, you can use the free WordPress Mobile Pack to convert the blog to a format that is fast-loading and readable on a smaller screen.

Other free and affordable things you can do include building a list of mobile phone numbers for customers who are willing to receive text-message alerts or text-message coupons; creating a mobile microsite coded in XHTML, CSS or other languages easily read by new mobile Web browsers and devices; or building a branded app and mobile ads to promote it using the services of companies like AdMob, GetJar, Mofuse, Mippin and MediaLets.

All entrepreneurs should be able to develop or use more powerful mobile apps to their advantage soon, said Rich Wong, a partner and venture investor with Accel Partners in Palo Alto who invested in AdMob (and GetJar) early on. That’s because, Mr. Wong said, new mobile devices, from their hardware features to their more open operating systems, are serving as “a richer substrata on which to build apps.”

He predicts geo-location services and “augmented reality” will begin to figure more prominently for traditional businesses. Augmented reality uses a phone’s camera, GPS and compass capabilities to create a street-view image that is layered with real-time information and hyperlinks. (It’s reminiscent of a scene included at 0:25 in the trailer for the movie “Fight Club.”)

At the M.P.A. event, a company called Layar presented an augmented reality mobile browser that impressed Mr. Wong. For example, he said, “With an augmented reality browser like Layar, you can hold up your phone, scan the neighborhood around you somewhere in Asia, and get back information on stores in the immediate area, including prices with a currency conversion back to U.S. dollars, or listings and discounts for a film that’s about to screen in a nearby cinema.”

Despite all of the new technology, a basic function of the mobile phone is still making phone calls. But even that’s changing. Adaffix, an Austrian company that won a Best in Female Entrepreneurship Mobile Premier Award, is offering voice calls that use search listings and social media data as a supplement.

That means a mobile user with an Adaffix app running can call a taxi service and get no answer but know that, upon hanging up, three alternative listings will be presented. The taxi services can offer coupons to try to scoop up the business. It’s a high-tech way to advertise that could serve traditional Main Street businesses well, said Adaffix founder and chief executive Claudia Poepperl.

Most important, understand that mobile and Web audiences are very different, said Mr. Harper of Percent Mobile. Someone at a home computer who checks out your restaurant’s Web site may be interested in videos of your chef or a PDF menu. Someone accessing your site by mobile is more likely to need to get directions instantly or to see if you have an open table. If you know, Mr. Harper said, “how the majority of your users are accessing your brand on mobile — are they using iPhone or BlackBerry or something else? — and what content they mostly need, you can be sure that they have a positive experience.”

See The Prize’s guide to coming business plan competitions. And here’s how to win a competition.

Reuters - What does the new LTE mobile technology offer?

VON - Mobile Data Can Be a Cheap Date

Billing & OSS World - Mobile Data Doesn’t Have to be Expensive

Businessweek - The Truth about Bandwidth

TelecomAsia - Mobile Broadband: Still growing but realism sinks in

Connected Planet - Youtube dominates mobile Internet traffic; mobile VoIP on the rise

Business Journal - The Apple effect on AT&T brings good times and bad

Telemanagement - Cutting an operator’s mobile data costs by 60% a year

Mobile Marketing Magazine - Report explains how operators can slash data costs

TMC - Research Shows How Operators Can Curb Mobile Data Costs

US Wireless Data Market Update - Q4 2009 and 2009

Download PPT | PDF

http://www.chetansharma.com/usmarketupdate2009.htm

Executive Summary

The US wireless data market grew 5% Q/Q and 24% Y/Y to exceed $11.8B in mobile data service revenues and thus exceeded $10B for each of the four quarters in 2009. For the calendar year 2009, the overall mobile data revenues for the US market grew 29% ending at $44 billion for the year (1% shy of our $44.5 billion estimate). For the calendar year 2010, we expect a 20% increase in mobile data service revenues accounting for over $53 billion in service revenues.

Verizon Wireless edged past China Mobile to become the second biggest mobile data operator by revenues.

The US subscription penetration was approximately 92% at the end of 2009. If we take out the demographics of 5 yrs and younger, the mobile penetration is 99%.

The messaging volume increased 7% from last quarter catapulting US as the number one texting nation by messages/user/month going past the long-time leader Philippines.

For the first time in the history of the US wireless industry, the data traffic exceeded voice traffic for the full calendar year. With almost 400 terabytes of data traffic, it exceeded voice traffic by a significant margin. We expect that the ratio between the two traffic sources is going to double in 2010.

Apple continued its iTunes juggernaut and if measured by billing relationships (of course not all accounts are mobile) Apple is  now the 10th largest mobile operator in the world.

Q4 2009 reported a 5.9% increase in GDP compared to the 3.5% increase in Q3 when the recession technically ended. While the overall economy is sputtering towards growth, wireless industry in the US remains vibrant as is evident by the increase in revenues and net-adds which jumped more than 5 million for the first time in 2 years.

What to expect in the coming months?

Christmas quarter generally yields best results of the year. Though the US mobile industry came out pretty unscathed from the recession, it will benefit from the improving economy. As such we expect the US mobile data service revenues to gain 20% to reach $53 billion in 2010. Mobile data will continue to be the engine of growth for the ecosystem providing at least 33% of the overall service revenues by the end of 2010.

The furious cycle of device releases is accelerating and one wonders if the longevity of each device is starting to shrink as even the hit devices like Droid and Nexus One are not allowed enough room to fully capitalize on their initial momentum. The app economy has been expanding as well. Part strategic, part hysteria, everyone is jumping into the pool to tap into the app river to pull in some revenues or use it more strategically to sell more devices, services, or advertising. (Stay tuned for more research on the subject in the coming days)

Microsoft is attempting a comeback with its 7 series devices though the delay in handset release as well as the lack of backward compatibility gives enough time for competitors to plan their moves. We are glad to see the industry going past the “PC like icons” for mobile phones (something we have advocating for more than 10 years, most recently in our paper “The Untapped Mobile Data Opportunity.” This will enhance user experience and help in extracting true value out of the mobile devices.

From the various announcements this year, we can expect an action packed 2010. However, it will be also an year of shakeouts with several key M&A transactions that will winnow down the competitive landscape in many segments.

Q1 2010 will also be important from the regulatory point of view with the national broadband plan being unveiled later this month. With the looming spectrum shortage, regulatory bodies can have a significant impact on the competitiveness of a nation. For example, in India, regulators haven’t been able to get their acts together for the past 3-4 years and its citizens continue to suffer from 2G. Similarly, many countries in South America have imposed unnecessary spectrum caps. The industry and regulators need to work hand-in-hand to make progress beyond speeches and paperwork.

To start planning for 4G, 5G, and beyond, US should think about rolling a 50 year broadband plan. While more spectrum is always helpful, will we have all the spectrum we need in 2050? or do we need to invent new technologies and business models that use spectrum more wisely? This topic will keep the industry occupied for some time to come. (Former FCC Chairman, Kevin Martin will be headlining our Mobile Breakfast Series event on March 10th to discuss the Spectrum Crises).

2010 will also be the year of network expansion with HSPA+, WiMAX, and LTE all coming into play in the US. As we had anticipated last year, the mobile data traffic kept on growing disproportional to the revenues. At the end of 2009, the US mobile data traffic was almost 400 petabytes, up 193% from 2008. To truly tackle the problem head-on, industry will need to adopt a multi-pronged strategy to manage their traffic more effectively. We discussed mobile data traffic in much more detail in our popular paper "Managing Growth and Profits in the Yottabyte Era." We will be issuing an update later this quarter so stay tuned.

It is also good to see the mobile industry expanding into vertical segments like Health and Retail. More discussion to come on these topics.

We will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.

Against this backdrop, the analysis of the Q4 2009 and 2009 US wireless data market is:

Service Revenues (Slides 8, 17)

• The US Wireless data service revenues grew 5% Q/Q to $11.8B in Q409. Compared to Q408, the data service revenues grew 24%.
• Verizon and AT&T accounted for 88% of the increase in data revenues in Q4 2009.
• The US mobile data service revenues crossed $10B for all the four quarters and stays ahead of Japan and China by a distance.
• AT&T experienced the most growth with over 7% increase Q/Q followed by Verizon at 5%.
• Verizon’s data revenues exceeded $4B for the second straight quarter and is only inches behind the global leader of over 10 years NTT DoCoMo.
• AT&T and Verizon now account for 69% of the market data services revenues and 62% of the subscription base.
• The average industry percentage contribution of data to overall ARPU is now 29%. US market is likely to pass the 30% mark in Q1 2010.
• Verizon edged past China Mobile to become the second biggest mobile data operator by revenue behind NTT DoCoMo. The top four US carriers are now a permanent fixture in the top 10 global operators by mobile data service revenues occupying #2, #4, #6, and #8 spot respectively. Apart from NTT DoCoMo and China Mobile, Verizon Wireless and AT&T are the only two other operators generating more than $3B in quarterly mobile data service revenues.

ARPU (Slides 9-12)

• Overall ARPU decreased by $0.45. Average voice ARPU declined by $0.98 while the average data ARPU grew by $0.53 or 4%.
• Verizon led in (blended) data ARPU with $16.24 followed by AT&T and Sprint. In terms of % contribution, all the top three operators exceeded the 30% mark (Verizon became the first operator to do so last quarter). T-Mobile ended the year with 22.2% of its revenue coming from data services.

Subscribers (Slides 13-15)

• In Q409, in terms of net-adds, the US market reversed the trend of the last 8 quarters and increased net-adds by 85% Q/Q to add approximately 5.1M new subscriptions.
• The messaging volumes in the US market now average almost 592 messages/subscriber/month thus becoming the number one texting nation going past Philippines.
• In terms of net-adds, thanks to the boost from the iPhone, AT&T led for the third straight quarter with 2.7M net-adds, edging its friendly rival Verizon which added 2.1M net subscriptions.
• T-Mobile and Sprint improved their net-adds from last quarter though it was primarily from the prepaid segment.

Applications and Services

• Non-messaging services continue to grab 60-65% of the data revenues for the US carriers.
• There are probably 18-20 sub-segments within mobile data services and consolidation looms. While the valuations are still high for rapid consolidation, we think that due to recession pressure, the M&A scene is starting to heat up esp. in mobile advertising with the acquisitions of Admob and Quattro Wireless.
• The usage and data consumption trends are enabling carriers to accelerate their 3.5G/4G plans and develop long-term business and technical strategies.

Handsets

• Nokia sold 129M+ units in Q4 2009 including 21M smartphones. Samsung again had a solid quarter with over 69M devices sold maintaining its market share at 21%. LG Electronics at 10%, Sony Ericsson at 4%, and Motorola at 4% rounded up the top 5.
• The constant drumbeat of new devices continued with Droid, Nexus One, and the fabled iPad.
• The growth in smartphone usage is also putting pressure on the networks which are not able to handle the load during peak times in certain cities thus forcing carriers to look for alternate strategies to satisfy the demand for broadband.

Policy and Regulations

• Q4 was also notable for the FCC scrutiny of the wireless industry. In outlining the four key principles of a) looming crisis of spectrum shortage b) removal of red tape c) enforce net-neutrality and d) open Internet, things have already started to change in the US Wireless Industry. The US broadband plan is scheduled to be unveiled later this month and can set the tone of innovation and regulation in the coming years.

Open

• The appstores battle is intensifying with OEMs and carriers are announcing their plans and some of them are opening their wares to woo the developer community. The number of non-operator appstores jumped 375% in 2009. In the midst of the appstores hoopla, Apple announced the passing of the 3 Billion download mark with increasing number of developers participating the ecosystem.

Data Traffic (Slide 16)

· For the first time in the history of the US wireless industry, the data traffic exceeded voice traffic for the whole calendar year. With almost 400 terabytes of data traffic, it exceeded voice traffic by a significant margin. We expect that the ratio between the two traffic sources is going to double in 2010.

Misc.

• India continues to be the hottest market on the planet in terms of net-adds with (again) a world record-setting month in Jan 2010 with 19.9 million net adds. To give you a perspective, this is almost 1.5 times  the number of subscribers US added in the whole year. It is like adding a Canadian wireless market every month. For the year 2009, India added 177 million subs vs. 106 million for China. Making money on the net-adds is a different proposition all together (more discussion on the international market in our global market update later this month)
• Willcom, the small Japanese carrier that started the flat-rate unlimited phenomenon filed for bankruptcy last month.
• Softbank of Japan looks set to be the first major operator (outside of Philippines) with more revenues coming from data services than voice.

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in May 2010. The next Global Wireless Data Market update will be issued in March 2010.

Your feedback is always welcome.

Should you have any questions about navigating or understanding the economic and competitive icebergs, please feel free to drop us a line.

Thanks.

Chetan Sharma

Disclaimer: Some of the companies mentioned in this note are our clients.

http://www.chetansharma.com/mobilevoip.htm

Mobile VoIP - Approaching the Tipping Point

Sponsored by Skype

This paper is a collaboration with Ajit Jaokar (FutureText) in London

Over the course of the last decade, mobile devices have become the most ubiquitous consumer electronic devices ever invented. Even in the poorest of the nations, mobile phones have evolved from being a luxury to an indispensible necessity. The paradigm of communication itself has undergone a significant transformation from just voice to multimode interaction. The trend is also discernable in the revenue numbers from the advanced mobile markets where voice revenue per user have been declining over the course of the last decade while most of the growth is coming from mobile data services. Mobile data services have evolved significantly from simple text messaging to multimode communication involving text, VoIP (voice over IP), video, and other forms of messaging and social networking interactions.

As we head into the next decade, the competitive landscape is going to change from year to year and sometimes even quarter to quarter. For major service providers, competition is no longer just from an operator who provides voice and data services but any company that captures the communication value chain. It is no longer sufficient to rely on voice revenues but providers need to think communications in a much more holistic form. Once the transport layer becomes all-IP in a given network, voice is nothing but another application that will work and interact with other applications in tandem often in real-time. The fear of cannibalization are unwarranted as our research shows that by offering consumers comprehensive services, the lifetime value of customers can be increased, churn can be reduced, and the overall value proposition of the operator increases tremendously.

The forces of technology, business models, consumer expectations, regulatory regimes, competition, and collaboration will help define the communication landscape of the next  ten years. This paper will take a look at the evolution of the Internet, mobile broadband, and mobile communication and how consumer behavior and expectations have changed. Next, the emergence and the role of VoIP is discussed in further detail before we delve into the intricacies of communication economics to dispel some myths and layout the framework for how operators should approach the new communications world.

Given the embrace by major tier-one operators, we believe that mobile VoIP is on the verge of becoming an integral part of the communications framework. This acceptance represents a tipping point in the evolution of mobile VoIP. The ecosystem participants who embrace and collaborate to provide a holistic and comprehensive communication solutions stand to benefit the most.

Download Paper (pdf)

Rob Glaser, Chairman, Real Networks who will be discussing “Mobile Media Innovation” His insights are always quite interesting, so really looking forward to his talk.

Kevin Martin, former FCC Chairman and partner Patton Boggs will be talking about the hottest topic at the FCC – Spectrum Crisis? Trends in Wireless. Given all that is going on with the national Broadband plan and the issues with spectrum, this talk will be particularly insightful.

More details at http://mobilebreakfastseries.com/ Register early and often

As always, thanks to our generous sponsors - Motricity, Openwave, WDSGlobal, and Clearwire

NYTimes - The iPad - To 3G or Not to 3G?

Businessweek - Apple iPad Adds to Pressure on AT&T

NYTimes - As Devices Pull More Data, Patience May Be Required

GigaOM - How AT&T Will Deal with iPad Data Traffic

Businessweek - iPad: Pushing More Americans to Pay More for Wireless Service

Businessweek - Mobile-Ad M&A Frenzy May Continue

Businessweek - Verizon Wireless-AT&T ‘Price War’ May Boost Revenues

GigaOM - In Q4, Data Was Mobile’s Hot Spot

RCR Wireless - RCR WIreless Digital Edition Jan 2010

Reuters - Are pico projectors the next big cellphone trend?

Mediapost - Verizon Cuts Voice Pricing, Streamlines Data Plans

MobileFuture - Net Neutrality Regulatory Proposals

Mercury News - Apple and Google: It’s a mobile turf war

GigaOM - How Microsoft Can Get Back in the Mobile Game

GigaOM - Wireless Pricing from Verizon Wireless

Mediapost - Survey: Mobile Execs See Big Ad Gains in 2010

GigaOM - China Mobile Data Gold Rush Begins

Plastics News - Consumers like their phones mobile, smart

Our media partner moconews is putting together a pretty good event on Paid Content. Given all the commotion around pay walls and monetization of content, should be a pretty good discussion. The speaker line up is terrific.

Roster includes Hilary Schneider, EVP for Yahoo (NSDQ: YHOO) North America, who will take part in a Q&A; Steven Brill, Co-Founder, Journalism Online; Bruce Campbell, President, Digital Media and Corporate Development, Discovery Communications; (NSDQ: DISCA) Rio Caraeff, CEO, Vevo; Josh Cohen, Senior Business Product Manager, Google (NSDQ: GOOG) News; Shawn Colo, Co-Founder, Demand Media; Bart Decrem, Co-Founder and CEO, Tapulous; Kenneth ‘KC’ Estenson, SVP and GM, CNN.com; Rob Grimshaw, Managing Director, FT.com; Cella Irvine, President and CEO, The About Group; Patrick Keane, CEO, Associated Content; Marty Moe, SVP, AOL (NYSE: AOL) Money & Finance; Quincy Smith, partner, Code Advisors and former head of CBS Interactive; (NYSE: CBS) and John Squires, Interim Managing Director, Next Issue Media.

Date: Feb 19th.

Tickets are selling fast so please register now. The $895 Early Bird ends Jan. 31; the price increases to $1,195 on Feb. 1. We can provide a discount for groups of three or more; contact paidContent2010@ContentNext.com for more details.

http://www.chetansharma.com/opticalwirelessbroadband.htm

Sponsored by Skyfiber

These are exciting times in the wireless industry. The innovation in technology, services, and business models is driving the global industry to new heights. While the global markets were feeling the pain of a brutal recession, the wireless industry for the most part sidestepped the crisis, especially the US and Asian markets. In the US, 2009 was a banner year for the mobile data services and applications. Each of the four quarters exceeded $10 billion in mobile data services revenue and the subscription penetration was approximately 93% by the end of the year.

The mobile industry is going through significant transition from being voice-centric to data-centric, from consumers spending 90% of their time talking to 80% of the time spending on mobile data and games. The main drivers of such an evolution are: better devices like the iPhone, Droid, Pre, Bold, etc., higher capacity networks such as WCDMA, HSPA+, and EV-DO Rev A, flat rate data pricing, and a heightened consumer awareness of mobile applications and services. This has boosted both the consumer engagement and the revenues from data services.

However, this increased usage comes at a cost. As users are becoming accustomed to an always-on, always-connected world of mobile, they are consuming tremendous amount of data that is putting significant burden on the networks especially the backhaul. Further, as the need for the bandwidth rises exponentially, we are approaching what FCC’s Chairman Genachowski termed as “a looming spectrum crisis.” In light of such infrastructure challenges, the industry needs to think outside-the-spectrum-box and think long-term else we will be in a perpetual cycle of crises. Traditional transmission technologies like Fiber and Microwave will benefit from complimentary technologies such as Optical Wireless Broadband (OWB), which enhances the operator’s toolbox to build out efficient broadband connectivity.

This paper discusses the mobile data growth, the backhaul demands, and the looming spectrum crisis in more detail. Further, the paper discusses the requirements for backhaul to support next generation traffic and the role of new technologies such as Optical Wireless Broadband to provide backhaul capacity solutions that are both economical as well as future-proof.

Download Paper (pdf)

Note: There is a small error in the quote, it should be 10c for online CPM and not $10

Mobile-Ad M&A Frenzy May Continue

Google’s purchase of mobile-ad company AdMob could be the first of many deals in this hot sector

By Olga Kharif

Michael Bayle has been fielding a lot of phone calls in the two months since Google bought mobile-ad company AdMob for $750 million. Bayle is a vice-president at Amobee, also in the business of placing ads on wireless handsets. "Our phone has been ring-ringing off the hook," Bayle says. "We are speaking to a number of parties."

Startups that specialize in mobile advertising are getting a lot of phone calls these days. Possible acquirers are gunning for a slice of an industry that according to ABI Research may generate $1.14 billion in sales this year, almost four times the $297 million spent in 2008. "Mobile ads are [one of] the hottest areas in technology right now," says M&A expert Tom Taulli.

There’s especially high demand for so-called mobile-ad networks, such as Amobee, which act as middlemen between advertisers and wireless service providers to broker the placement of ads in games, videos, and other mobile content. Then there are mobile-ad exchanges, such as RingRing, which often get involved earlier in the process, helping connect advertisers with mobile-ad networks.

On Jan. 20, mobile Web browser software provider Opera bought ad exchange AdMarvel. Earlier this month, Apple (AAPL) snapped up mobile-ad network Quattro Wireless for $275 million to $300 million, according to published reports. AdMob was Google’s (GOOG) third-biggest acquisition to date. Other mobile-ad companies may fetch far less than $250 million, Taulli speculates. Still, the dealmaking is far from over.

Analysts say potential targets include ad networks Millennial Media, Jumptap, Greystripe, and Tapjoy, and ad exchanges such as Mobclix. "The AdMob acquisition blew the roof off [valuations]," says Sunil Verma, co-founder of Mobclix, which soon expects to close a funding round. "It validates the market size and potential, and that’s sparked a trickle-down effect on others." Verma declined to discuss funding details. To date, Mobclix has received $4 million to $5 million in angel funding from investors, including Verma and three other founders.

DE RIGUEUR FOR MANY ADVERTISERS

Millennial Media is the largest of the potential targets. It received a $16 million funding round in November and aims for an initial public share sale in 2011 or later but would consider a buyout sooner for the right price, Millennial Media CEO Paul Palmieri says.

After years of overoptimistic projections, advertisers are finally boosting spending on mobile ads as consumers step up purchases of smartphones that are better-equipped than cell phones for Web surfing. Jumptap’s revenue last year increased five times over its 2008 figure, says CEO Dan Olschwang. "More [advertisers] now treat mobile as a must-have component in their media mix," he says.

In November 2009, 61.5 million U.S. users accessed the Internet via mobile devices, up from 46.6 million a year earlier, according to Nielsen Mobile. Within five years, more people will access the Web via mobile devices than personal computers, Morgan Stanley (MS) analyst Mary Meeker said in a recent report.

Mobile ads may also be more effective, researchers say. Mobile ads have a higher so-called click-through rate, a measure of the rate at which an ad is clicked on by a person who views it. The rate for mobile ads is 2% to 5%, compared with 0.2% for PC-based online advertising, according to Chetan Sharma, an independent wireless industry analyst. Mobile ads are also less expensive, costing as little as $1 to $6 per 1,000 impressions, while a PC Web banner costs closer to $10, Sharma says.

EXPONENTIAL GROWTH

Coca-Cola (KO), Honda (HMC), Intel (INTC), Motorola (MOT), and National Geographic are among companies now advertising on mobile phones. "The number of advertisers doing mobile programs has grown exponentially," says Paul Kultgen, a director at Nielsen. The researcher’s November survey showed that more than 1,000 advertisers now put out mobile display ads, a fivefold increase over a year earlier.

AOL (AOL), Microsoft (MSFT), Yahoo! (YHOO), and Nokia (NOK) have acquired mobile-ad companies in the past several years and may make more purchases, analysts say. Representatives of all four companies declined to comment for this story. Handset makers such as Samsung and Motorola may also join the buying, analysts speculated. Representatives of both companies declined to comment. Online retailers Amazon (AMZN) and eBay (EBAY) are also potential acquirers, says Olschwang of Jumptap. An eBay representative declined to comment, while an Amazon representative declined to comment.

Meantime, even potential targets are turning into acquirers. On Jan. 13, Amobee bought London-based RingRing Media for an undisclosed sum. Bayle says Amobee may make other purchases.

Kharif is a reporter for Bloomberg BusinessWeek in Portland, Ore.

In our Mobile Advertising book, we had introduced the 5 point framework to think about mobile advertising. Since then, it has been adopted by major mobile advertising players and advertisers as a way to plan, manage, and monitor their efforts and campaigns.

The key elements of the framework are: Reach, Engagement, Targeting, Viral, and Transactions. Reach is always important and will remain the first filter applied to most campaigns, engagement has gotten better but many campaigns are still in dark ages, targeting has improved but still way below its potential, am still surprised that companies don’t embed a way to share in each and every aspect of the campaigns, and as far as the transaction is concerned, we are not even closed. Very few companies have “closed the loop.”

1. Reach - How many unique customers can you reach?

2. Targeting - Mobile thrives on targeting. Ad networks that can provide targeting beyond country, carrier, and handsets to location, demographic and context will be the ones offering more value to both the advertisers and the publishers. Table below lists some of the options available from some of the leading players in the ecosystem.

3. Engagement - One has to move away from just counting the number of clicks or the number landing page impressions and quickly start measuring engagements in the form of time spent, number of times content was saved or forwarded across the many mobile channels.

4. Viral - One of the key features of mobile is its ability of one-click sharing. If something is "good," it will catch-on fast. One has to only target the 1% power-users to reach 20-50% of the subscriber base. Such capability should be built into every campaign and measured accurately to determine its true effectiveness.

5. Transactions - As we mentioned before, mobile enables a closed loop functionality like no other medium. Transactions is essentially to measure the "true" ROA.

I have long argued that w/o the “closed loop,” advertising is a lot of waste with no real ROI. Advertisers can feel good about the creatives but if it is not yielding results, what are you smoking? If it is giving results, but you can’t measure it, then how can someone be trusted with yet another multi-million dollar campaign. I know this is the way things have been done for decades but over the last 24 months, things have been tilting towards digital, towards measurability, towards accountability. A number of big brands have stopped, i mean completely stopped spending money on print, radio and moving to digital.

This brings us back to the original question – who redefines the mobile advertising ecosystem and it very well might be Apple and the reason will be the iTunes platform, for the same reason Apple Appstore crushes every single appstore out there, the reason Google Android Marketplace hasn’t been successful – it is the billing, stupid.

By having a good control over the billing piece, Apple can provide an excellent end-to-end user experience and on the back-end measure every bit of information that can inform the developer, advertiser, Apple of what’s going on, discover trends much before the mainstream media does.

Apple can do the same thing with advertising – by providing a much more rich platform for engagement advertising i.e. the ads become much more engaging than the stale banner ads that go no where, you don’t loose the original page or app while navigating to an add.

It is quite likely, Apple will build a solid advertising platform that empowers developers and advertisers to truly harness the power of mobile advertising by providing the closed loop lab for experimenting and learning while keeping competitors at bay. So, who can compete with this strong proposition – Google and Carriers but Google Checkout has had  limited success and integrating with Carrier billing is not straightforward.

So, just like how Apple redefined the music industry, redefined the device industry, redefined the apps industry, it might very well redefine the mobile advertising industry. It has got the smarts, the vision, and the arsenal to make it all happen.

Have you registered yet?

March 10, 2010 7:30-11am. Location: TBD

Registration

Kevin Martin, Partner, Patton Boggs and former FCC Chairman

Kevin Martin is a former Chairman of the U.S. Federal Communications Commission (FCC) and co-chair of Patton Boggs’ technology and communications practice. Mr. Martin has nearly two decades experience as a lawyer and policymaker in the telecommunications field, including his tenure as FCC Chairman from March 2005 to January 2009 when the industry was undergoing a period of unprecedented growth and innovation. Using his vast knowledge of the telecommunications industry, Mr. Martin helps clients take advantage of wireless and broadband opportunities, counseling businesses on their strategic business initiatives and the nuances of FCC regulations and communications policies.

While Mr. Martin was FCC Chairman, the Commission created a regulatory environment that encouraged infrastructure investment and broadband competition, leading to greater coverage and decreased prices for Americans. The number of broadband lines in the country doubled to more that 100 million. Under Mr. Martin’s leadership, the FCC conducted the two most successful and profitable spectrum auctions in U.S. history, raising almost $20 billion in 2008 alone. Mr. Martin also spearheaded the FCC’s initiative to dedicate more than $400 million to the construction of broadband networks for state-wide and regional health care networks reaching more than 6,000 health care facilities.

As FCC Chairman, Mr. Martin also represented the U.S. in dozens of bilateral negotiations and addressed numerous international conferences as a global leader on telecommunications and technology policy.

Before joining the FCC as a Commissioner in 2001, Mr. Martin was a Special Assistant to the President for Economic Policy and served on the staff of the National Economic Council, focusing on commerce and technology policy issues. He served as the official U.S. government representative to the G-8’s Digital Opportunity Task Force. Mr. Martin was Deputy General Counsel on the Bush-Cheney 2000 Presidential campaign and also previously served as a counsel to a Commissioner at the FCC.

Rob Glaser, Founder, Chairman and CEO, RealNetworks Inc

Rob Glaser, Founder, Chairman and CEO of RealNetworks, Inc., has long been intrigued with the nexus of media, computing, communication and the Internet. Since founding Real in 1994, Mr. Glaser has played an integral role in the transformation of the Internet into the next great mass medium. In 1995 under Mr. Glaser’s direction, Real introduced the groundbreaking RealAudio. Followed by RealVideo, RealPlayer and the systems to distribute audio and video including the Helix technologies, RealNetworks has continued to innovate and bring technologies to market. Additionally in 2000, RealNetworks began offering aggregated premium content online directly to consumers in a subscription service. In 2003, RealNetworks purchased Listen.com and built the Rhapsody music service into the leading music subscription service. With the combination of technology and business systems for monetizing media, RealNetworks and Mr. Glaser are at the forefront of the Internet media revolution. Prior to founding RealNetworks, Inc., Mr. Glaser worked for Microsoft for 10 years in a number of executive positions, including Vice President of Multimedia and Consumer Systems. Mr. Glaser has served on several non-profit boards and committees, including his appointment by President Clinton to the Advisory Committee on Public Interest Obligations of Digital Television Broadcasters. Mr. Glaser is a graduate of Yale University, with a B.A. and an M.A. in Economics and a B.S. in Computer Science.

2010 Mobile Industry Predictions Survey

http://www.chetansharma.com/MobilePredictions2010.htm

Mobile Predictions Survey (pdf)

Mobile Predictions Survey (ppt)

First things first. From all of us at Chetan Sharma Consulting, we wish you and yours a very happy, healthy, and prosperous 2010. Thanks to all who participated in our 2010 Mobile Predictions Annual Survey. We have found it is the best way to think about the trends coming our way.

Before we dive into the survey results, let’s do a quick wrap-up of the year that was. Well, since we  just completed one heck of a mobile decade, let’s do a quick jog down the memory lane.

The Last Decade: 2000-2009

Each new decade brings its own consumer and technology trends. During the 2000s mobile cemented its place in the global society fabric, the use of mobility became addictive and pervasive, to be without mobile seemed a curse and innovation blossomed and took user expectations to new heights.

From a pure statistical point of view, the global mobile subscription penetration grew from 12% in 2000 to approximately 68% in 2009 - phenomenal by any measure. The overall revenues grew over 400%, the data revenue grew 32,600% and the total subscriptions grew 563%. NTT DoCoMo paved the way with the i-mode launch in 1999 and they were the operator to emulate throughout the last decade, leading every single year in data revenues, in new application and service revenue sources, and in innovation and risk taking. They tried to export the success to other regions with little reward but DoCoMo clearly led the industry in taking mobile devices where they have never gone before.

China and India were late to the party but during the second half of the decade caught up with the western world and eventually surpassed all nations becoming number one and two nations by subscriptions respectively. In 2006, China Mobile became the most valuable operator passing Vodafone.

Mobile devices went significant transformation as well. From the early Bluetooth, camera, and music phones to the iPhones, the Storms, and the Androids, the industry was transformed by the introduction of Apple’s iPhone in 2007. While Bluetooth, sleek designs, camera phone defined the first half of the decade, the second half was all about the applications and the mobile web. While Nokia dominated the entire decade in terms of the sales and profits, having missed the touch revolution, it leaves the decade a bit battered and a bit behind playing catch-up to the newcomers who profoundly disturbed the status quo.

Razr carried Motorola through 2006 when its global share peaked but was left to reinvent itself during the second half. It seems to have redeemed itself with the successful launch of Droid and upcoming Android devices. While many in the industry predicted RIM’s demise, the company has only gotten stronger and is looking good for the 2010s. The emergence of Samsung and LG as strong players in the mobile ecosystem was also a big story of the decade with Samsung increasing its share by 380% and LG by 575% becoming the number 2 and 3 players respectively.

While Microsoft’s Windows Mobile had an early start and the enterprise market share, it lost its way through several missteps and is on dialysis as we enter the new decade. One shouldn’t count WM out though but there is a lot of work to be done before it can capture the imagination of the ecosystem which has been sequestered away by iPhone and Android.

While many new application areas were introduced during 2000s, none was able to displace SMS as the leading app category by usage and revenues. However, it’s relative share has started to come down especially in North America and Western Europe.

As data usage grew, so did the data traffic bringing many data networks to their knees. We expect the data traffic consumption to only accelerate. Many people are underestimating the growth rates (as they did previously) and the strain the increase in consumption will put on the unprepared networks. Projector phones will take media  consumption to a new level. Data management is going to be big business in the 2010s.

Overall, the mobile industry became a trillion dollar industry in 2008 and the data revenues are increasing in almost all regions. Voice is being commoditized at fast pace and that has put the traditional economics and ecosystem wealth distribution in topsy-turvy.

The US market also experienced tremendous growth with mobile data service revenues climbing 21,327% and becoming a mainstay in the mobile economy. In 2008 it crossed Japan as the most valuable mobile data market. US was late in adopting SMS but caught fire once American Idol started using it and even played a good role in the 2008 Presidential election in showcasing the power of mobile. Verizon started the decade being the number one operator and after trading places with Cingular and ATT grabbed the title back in 2009 (after the Alltel acquisition) to become the most dominant carrier in North America. Many smaller players competed by being innovative with Cincinnati Bell launching the fist UMA device, Sprint the first mobile eReader, and TMO launched the hotspot business which has now become an essential component of an operator strategy going forward.

Mobile is also replacing landline at a much faster pace than expected and within the first half of the new decade, we will have majority of the users using mobile vs. landline. Just like the last decade, this one starts with a new standard deployment of LTE that will keep operators and vendors busy throughout the decade. However, a lot of the developing markets will still be deploying 3G during the first half of the decade.

Infrastructure providers suffered the most in the decade bookended by the two recessions. Consolidation of giants (Alcatel Lucent, Nokia Siemens), bankruptcies of the famous (Nortel), and uprising of the upstarts (Huawei) pretty much defined the decade for the segment. Ericsson and Huawei enter the new decade from a strong position and looking to dominate the global markets.

The last decade was also marked by some prominent IP battles such as RIM vs. NTP, Qualcomm vs. Broadcom, Sony Ericsson vs. Samsung, Upaid vs. Satyam etc. (disclaimer: we worked on some of these cases and testified as an expert)

Here is our “subjective” list of movers and shakers of the last decade

2000-2009

2010-2019

Operator of the Decade

NTT DoCoMo

DCM led the way in almost all new category of apps and services. Its data service revenue was highest in each of the last 10 years

DCM will continue to lead along with KDDI and SKT. However, it might be the carriers with tremendous scale who will have the calling cards in the new decade. Watch for China Mobile, Vodafone/Verizon, Telefonica, Orange, Bharti, Unicom, Singtel

OEM of the Decade

Nokia

Nokia dominated in sales and revenues in each of the 10 years and while the last couple of years took some shine off its glorious past, the company nevertheless came out ahead

RIM, Apple, Nokia, Samsung

Smartphone OEM of the Decade

Apple

Smartphones as we know them were introduced by RIM but Apple defined the category and the subsequent ecosystem

This space will be very competitive with Apple still the gold standard to beat

Infrastructure Provider of the Decade

Ericsson

Its prime rivals struggled to stay afloat while Ericsson grabbed most of the revenues from infrastructure contracts and is very well positioned for the next decade

Ericsson is joined by Huawei as the two top infrastructure provider with Huawei giving tough competition for LTE contracts. ZTE and other Chinese infrastructure providers will also replace some of the incumbents

Nation that led in mobile data

Japan

This is a no brainer. Japan led with Korea a close second. Finland, UK also impressed

US, China, and India are well positioned to make an impression but most likely during the second half. Japan will still be a major player

Device of the decade

iPhone followed by Razr

iPhone impressed with form and function while Razr with its global sales making it a top selling device of all times

The field might get more crowded as all OEMs focusing on the smartphone category. However, OEMs who also focus on the 90% of the market w/o smartphones might win the top prize

The year 2009

Apple continued to dominate the headlines for the third straight year - whether it was the launch of 3GS or the upcoming introduction of the fabled tablet. Google too kept the ecosystem active. It has executed on its mobile strategy with brilliant acumen though causing significant consternation amongst its partners who it needs to be successful. It has been often misunderstood by competitors, regulators, and partners. Often, they have focused on Google’s tactics vs. its strategy. Look for these two players to be very aggressive as they try to fight for the mantle and the mindshare.

While Nokia leads the OEM space by a good distance, its momentum in the smartphone space left a lot of question marks. Motorola made a credible comeback with Cliq and Droid. Samsung and LG continued to innovate and expanded on their share of shipments and revenues.

India outpaced China in net-adds and crossed 500M though it is still quite behind China’s 750M. The M&A and the consolidation process became active in Asia with several of the big regional operators looking to flex muscles in the international markets. After several delays, China started deploying 3G while India again fumbled and postponed its 3G auction.

US mobile data market continued its pace in 2009 with each of the four quarters exceeding $10B in data service revenues. The gap between the top two operators and the rest grew to be the biggest in the decade and the industry weathered the recession with ease. There was a clear shift towards prepaid especially for Sprint, T-Mobile, and the tier 2/3 operators.

2009 was also defined by significant activity on the application front. With Facebook eclipsing 100M subscribers and Appstore exceeding 2.5B downloads, sky is the limit.

The year also saw an unprecedented growth in mobile data consumption. As we had predicted, for some of the networks, the growth proved to be a double-edged sword. Many in the industry are banking on LTE to help relieve the pain but will be surprised that depending solely on the upgrade strategy will not be enough. Declaring spectrum as a looming crisis, FCC also started tinkering with the mobile industry and the broadband plan.

Japan exceeded 90% in 3G penetration while US subscriptions ventured into the 90% territory. Most of western Europe is way past 130%.

All in all, a terrific year considering that we went through one of the worst recessions in a generation. As we bid goodbye to the last decade, Nexus One and iTablet only serve to whet our appetite of what’s to come.

On a personal note, we started our consulting practice this last decade as we were coming out of the bubble recession and have been fortunate to work with some of the brightest brains and companies in the global ecosystem. We also had a chance to work on some key initiatives that impacted the ecosystem in profound ways. Many thanks to our clients, colleagues, friends, and readers. We will be involved with many new initiatives over the next decade and are looking forward to the conversations through the research notes, books, speeches, panels, whitepapers, blog posts, facebook and twitter feeds, and more.

Thanks and Happy New Year. May the upcoming decade leave you happier, healthier, and more successful than the previous one.

As we eluded to earlier, 2010 will be a pretty eventful year from several perspectives: business models, user experience and expectations, ecosystem posturing, disruption, and friction. How are things going to shape up? What will be hot and what will fade into oblivion? How will competition shape up the new sub-segments?

We put some of the questions to our colleagues in the industry. We were able to glean some valuable insights from their choices and comments. This survey is different from some of the others in the sense that it includes industry movers and shakers participation. Executives and insiders (n=150) from leading mobile companies across the value chain and around the world opined to help us see what 2010 might bring.

11 names were randomly drawn for 3 special prizes. The winners are:

1. Claire Boonstra, Cofounder, Layar- INQMobile 3G Chat device

2. Michael Libes, CTO, GroundTruth - Open Mobile Book

3. Henri Moissinac, Head of Mobile, Facebook - Open Mobile Book

4. Subba Rao, CEO, TataDoCoMo - Open Mobile Book

5. Saumil Gandhi, Product Manager, Microsoft - Open Mobile Book

6. Sarah Reedy, Senior Editor, Connected Planet - Open Mobile Book

7. Mike Vanderwoude, VP & GM, Cincinnati Bell Wireless - 2010 Mobile Almanac

8. Pinney Colton, VP, GfK - 2010 Mobile Almanac

9. Tim Chang, Principal, Norwest Ventures - 2010 Mobile Almanac

10. Laura Marriott, President - 2010 Mobile Almanac

11. Asha Vellaikal, Director, Orange - 2010 Mobile Almanac

Thanks to INQMobile and my friend Ajit Jaokar for contributing the prize gifts.

Despite conventional wisdom, what will not happen in 2010?

There were many. Sampling - Verizon iPhone, Microsoft Phone, Sprint will not be bought, Femtocells won’t gain traction, RCS will not happen, Google will not enter handset market directly, iPhone won’t lose steam, Android won’t bring coherence, NFC won’t take off, WiMAX won’t disappear, Nokia won’t bounce back, Palm won’t die, “Year of Mobile” noise won’t subside, carriers won’t be delegated as dumb-pipes.

It is hard to cover the mobile industry in 20 questions. As pointed out by our panelists, there are a number of other issues and opportunities that will help shape our ecosystem - monetization of social networks, augmented reality, the fight for mobile advertising dollars, continued impact of globalization, security and privacy, NFC, IMS, VoIP, enterprise apps beyond email, battery improvements, new interaction modalities, health risks of RF radiation, Mobile 3.0, LTE, single purpose devices, 3G in India, Bada, app vs web, developer turmoil, featurephones, smart grids, M2M, Chrome, etc.

However, be rest assured, we will be tracking these and much more throughout the year and sharing them through various channels.

Thanks again to everyone who contributed. We will be calling on you again next year. We are clearly living in "interesting times" with never a dull moment in our dynamic industry. It has been a terrific year for us here at Chetan Sharma Consulting and we are looking forward to the next decade and seeing many of you along the way.

We hope you enjoyed gaining from the collective wisdom. Your feedback is always welcome.

Be well, Do Cool Work, Stay in touch.

Thanks.

With warm wishes,

Chetan Sharma

Disclaimer: Some of the companies mentioned in this note are our clients.

Now onto the 2010 Mobile Industry Predictions Survey Results

The panel comprised of movers and shakers from around the world

What will be the biggest stories of 2010?

Jan seems to be the Google Phone vs. Apple Tablet matchup. Our panel though voted for the continued growth in mobile data as the top story.

Have we recovered from the recession? (Please select one)

Majority thought we are out of it though some might still feel the pinch

Who will be the most open player in the mobile ecosystem in 2010? (Please select one)

Google has done a great job at maintaining its image as THE open leader

Will Android handset sales exceed iPhone’s in 2010? (Please select one)

Despite Androids coming in droves, iPhone will still be the king of the hill

When will we see tiered pricing plans for smartphones in the US from tier 1 operators? (Please select one)

There are indications that this might happen sooner rather than later

What will happen to the mobile prepaid subscriber base in the US? (Please select one)

Prepaid made a strong comeback in 2009 and a good majority thought that the trend is likely to continue

By how much will the mobile advertising ad-spend increase in 2010? (Please select one)

Mobile Advertising was the only advertising segment with positive growth last year so it is no surprise that folks expect it to more than double this year

What will be the impact of the FCC’s national broadband plan on the mobile industry in 2010? (Please select one)

Not much is expected from the various rulings that might come this year with most expecting the courts to have the final word.

Who will be the mobile comeback story of 2010?

Having bet its future on Android, Motorola was voted as the comeback kid of 2010

What will be the impact of Google Phone?

It’s pretty clear, Google and Apple are duking it out for the developer mindshare. Google wins in either case.

Which areas will feel the most impact from FCC?

Net neutrality is the area where they will have the most impact

Which solutions will gain the most traction for managing mobile data broadband consumption?

While only a holistic approach can provide complete relief, tiered mobile data pricing might have the most impact

When will the carrier-branded appstores lose steam? (Please select one)

Most expect carrier-branded appstores to be a thing of the past in 2010

What will help mobile cloud computing gain traction in 2010?

Mobile cloud computing is gaining steam and the reason is storage and media

What will be the most successful non-mobile-phone category in 2010? (Please select one)

Netbooks seem to be the strongest category followed by eReaders, Tablet, and M2M

What will be the breakthrough category in mobile in 2010? (Please select one)

Mobile Advertising and Mobile Payments share the top honors

By the end of 2010, which will have more subscribers? (Please select one)

LTE might have the momentum but WiMAX has the subscribers

How will Netbooks do through the operator channel? (Please select one)

No major impact from the operator channel

Which standards will gain traction?

No major impact from the standards

What mode of mobile payments will get any traction in North America and Western Europe in 2010?

The category will expand in different ways with more items being charged on the operator bill

December

AdAge - Can Google Sell — and Market — a Smartphone?

MobileHealthNews - The 15 wireless health VC deals of 2009

RCRWireless - The untapped mobile data opportunity

BusinessWeek - Managing the Wireless Data Deluge

Yahoo Tech Blog - Surprise! AT&T wins in 3G mega test

Christian Computing Magazine - What is 4G?

MediaPost - Mobile Phone Rebound in 2010

Telephony Online - Mobile data set to explode

NY Times - AT&T takes the blame, even for iPhone’s fault

NY Times - AT&T to Urge Customers to Use Less Wireless Data

BusinessWeek - AT&T Price Moves May Backfire

Yahoo Tech Blog - No matter the carrier, US 3G service is nothing to shout about

Moconews - The Sorry State of 3G In the US

Telephony Online - Open to alternatives

Telephony Online - Breaking down the walled garden

Moconews - Mobile Broadband is causing problems on all sides of the equation

GigaOM - Clash of the titans in the mobile ecosystem

November

AdAge - Verizon Wins Round 1 in Legal Spat with AT&T

Mediapost - Judge Sees No Evidence

Globe and Mail - Convergence at last

IBM - Tough Times Call for Superior Customer Care

Reuters - Demand for fast networks forces telcos to team up

GigaOM - With Wireless Data, Smaller Carriers Must Mind the Gap

Telephony Online - Carriers must be open to compete

FierceMobileContent - US mobile data revenues grow to $11.3B in Q3

Mediapost - Madison Avenue Backs Google-Admob Deal

RCRWireless - Solutions for the Broadband World

Telecom Paper - US mobile data market grows 27% in Q3

Reuters - Les opérateurs télécoms forcés de s’allier pour suivre le rythme

October

AdAge - Could the Droid Be the Device That Finally Dethrones the iPhone?

SNS - FireGlobal - West Coast CTO Challenge

Xconomy - Highlights from FiReGlobal

TelecomsEurope - Getting it right on mobile broadband

RCRWireless - Defining Mobile Broadband

Mobile Marketer - Mobile CPM measurement standards are essential

September

Fiercewireless - Mobile advertising measurements still lack standardization

GigaOM - US leading the Global Mobile Data Boom

GigaOM - Mobile Advertising Metrics: What matters most?

Moconews - Full speed ahead as US carriers invest billions, is it too much?

AdAge - Mobile Video Gets Ready for the Masses

MIT Technology Review - The New Faces of Android

NewTeeVee - With MediaFLO disappointing, Qualcomm wants to become a Mobile CDN

GigaOM - Don’t Neglect the Network, The Ultraband Panel

NY Times - Customers angered as iPhones overload AT&T

RCR Wireless - The RCR Ecosystem - An Overview

IT Business Edge - The Death of the Early Adopter

GigaOM - New Metrics for Mobile Ad Networks

GigaOM - How the iPhone is driving a wireless bandwidth boom

August

Fortune - Bandwidth hogs - iPhone and other smartphones

Telecompaper - US mobile data market grows over 30% in Q2

Mediapost - Prepaid: Too much of a good thing?

GigaOM - State of the US Wireless Market Q2 2008

IT Business Edge - Data Helps Wireless Carriers Work Through the Recession

FierceBroadbandWireless - Report: 3G penetration about 40% in 2Q

FierceMobileContent - US mobile data service revenues jump to $10.6B in Q2

IT Business Edge - Good Times Ahead for Telecom Vendors

Mercury News - FCC probes Apple’s rejection of Google Voice for iPhone

IT Business Edge - Cellular Data Explodes, Even in Bad Economy

Wireless and Mobile News - The worst is over says Chetan Sharma

July

WSJ - Big Phone Companies Are Unlikely US Antitrust Target

GigaOM - Mobile Broadband Will Trigger Global Innovation

BusinessWeek - The Wireless Data Boom Will Cost the Carriers

Xchange - Unwired

Gestion - Del compromiso a la compra (in Spanish)

BusinessWeek - AT&T’s Designs for the Wireless Market

Mediapost - IAB Unveils Mobile Media Buying Guide

Xconomy - A Yotta Insights on Making Money in Mobile

Mediapost - AT&T Wants Devices To Expand Use of Wireless Networks

June

Wireless Week - Tough Times Call for Superior Customer Care

BusinessWeek - The iPhone’s Wary New Rivals

GigaOM - How iPhone 3.0 Will Impact Wireless Networks

AdAge - Where to Find the Marketer Opportunities in the new iPhone

NY Times - Cellphone Locator System Needs No Satellite

Washington Post - Skyhook Wireless Hopes to Maintain Early Lead in Location Finding

TMCnet - Mobile ARPU Drops Globally, Traffic Grows

EConsultancy - Why ATT cares more about new iPhone users than existing ones

May

Business Week - GigaOM to Begin Subscription Service

GigaOM - Meet GigaOM Pro, Our Subscription-Only Research Service

TMCnet - AT&T Considers Cheaper iPhone Service, Device

Poynter - Summer 2009 Could Be Right Time to Expand Mobile News Services

Telephony - Verizon Wireless not messing with prepaid

Boston Globe - Surreptitious success

Business Week - Cheaper iPhone Plans from AT&T?

TMCnet - Smartphones Contribute to Mobile Ad Growth

BizReport - US mobile revenue tops $10 million

NY Times - US Pulls Ahead in Mobile Data Revenue

BusinessWeek - Wireless Industry: Engaged in Double Counting?

Washington Post - US Wireless Data Revenues Hit $10 Billion For the First Time Ever

TMCnet - US Mobile Data Services Revenues Top $10 Billion in Q1

Mediapost - Mobile Marketing Company Velti Acquires Ad Infuse

Telappliant VoIP News - US mobile broadband market grew by 24% in 2008

GigaOM - The iPhone Will Not Destroy the Wireless Business

FierceMobileContent - US mobile data revenues cross $10 billion milestone

Mediapost - US Mobile Data Revenue Hits $10 Billion in Q1

TelephonyOnline - Is prepaid growth an illusion?

Telephony - Verizon, Google duke it out for employees

Moconews - Dying or Thriving? The Debate Over CDMA

April

MIT Technology Review - A New Breed of Netbook?

Advertising Age - Who Needs the iPhone? Verizon beats AT&T in new customers

BusinessWeek - Wireless Carriers: Your New PC Retailer?

MIT Technology Review - Gmail Sidesteps the App Store

WIRED - Smartphone War Heats Up, Google Phones Still MIA

WIRED - Concept Phones go on Display at Wireless Trade Show

Washington Post - Is the Rush to Develop iPhone Apps Creating A Bubble?

FierceDeveloper - Gmail upgrade heralds leap mobile web apps

March

BusinessWeek - Prepaid Takes Off

NYTimes - Apple Shows Off Next Version of iPhone Software

Mercury News - Your phone, your life: New apps change how you use mobile devices

CNNMoney - US Wireless Data Revenues on the Brink

GigaOM - After Solid 2008, US Wireless Data Revenues may Slow

FierceMobileContent - US mobile data revenues grow to $34B in 2008

MediaPost - US Mobile Data Grew 39% in 2008

TelecomAsia - iPhone driving mobile data boom, says survey

TMCnet - Mobile Data Up, Data Cards Slipping a Bit

February

Advertising Age - Wireless-Phone Companies Fight Rising Churn Rates

GigaOM - With Latitude, Google Fires Another Shot at the Mobile Operators

Businessweek - Sprint Nextel: The Canary in Wireless’s Coal Mine?

January

MobileMarketer - Economy makes business case for mobile advertising more compelling

iMEDIA - Mobile ad spend may fall flat in 2009

MobileMarketingToday - Chetan Sharma Consulting Survey: Respondents See Glass Half Full for Mobile Advertising in 2009

http://www.chetansharma.com/untappedmobiledataopportunity.htm

The Untapped Mobile Data Opportunity

Sponsored by INQMobile

The last two years in the global mobile market have been truly sensational. Over 1 billion new subscriptions added, over 2 billion new devices sold, and over $300 billion in mobile data revenues. The number of new iconic devices each quarter is on the rise, the consumer engagement is at an all time high and the new startups and entrepreneurs are brimming with ideas and new products. Devices like the iPhone, Storm, Hero, INQ¹, Mytouch, Cliq, Droid, N97 and others have captured the imagination of the media like never before. The smartphones or the integrated devices now account for approximately 9% of the global market. However, what’s often lost in the smartphone euphoria is the remaining 91% of the market and the significant opportunity of data-enabling these customers.

Operators who have focused on data services as their core service have benefited with high data Average Revenue Per User (ARPU). As we quickly transition into the hyper growth phase of mobile data services, players who are designing affordable devices and services with "mobile data" in mind are the ones who will benefit from a higher uptick in adoption and sustainable consumer loyalty. However, as operators have migrated from 2G to 3G, many have missed an opportunity to customize or introduce new services that take advantage of devices being mobile, interactive, and always available.

Traditionally, there has been a big gulf between the functionality of featurephones and the smartphones; however, there is an emerging category of devices that will provide the functionality of a smartphone for the price of a feature phone. Though the average selling price or the ASP of the smartphone has been dropping, the price is still high for a significant majority of the global subscriber base. Consumers who are looking for a sub $50 device still want to the access applications such as Facebook, Twitter, Google search, and make VoIP calls, etc.

In this paper, we will look at the opportunity to attract the 91% of the global user base into the mobile data ecosystem. We will quantify the opportunity, examine what this opportunity means to the mobile value chain specifically to the mobile operators and discuss the success factors to accelerate the migration of non-active data users into the data realm.

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